Sri Lanka Secures $4.2 Billion Debt Deal with China as Talks with Other Creditors Stall
Sri Lanka Overcomes Financial Crisis with China Debt Deal
Sri Lanka has announced a breakthrough in its efforts to tackle its worst financial crisis in decades. The country has reached an agreement with the Export-Import Bank of China, covering approximately $4.2 billion of outstanding debt. This development comes as negotiations with other official creditors have hit a roadblock.
IMF Program Review and Second Tranche
The debt deal with China will be instrumental in helping Sri Lanka pass the first review of its International Monetary Fund (IMF) program. It will also pave the way for the country to secure a second IMF tranche of around $334 million. The finance ministry of Sri Lanka has issued a statement acknowledging the significance of the agreement, but no further details have been provided.
China: Sri Lanka’s Largest Bilateral Creditor
China holds the position of being Sri Lanka’s largest bilateral creditor. This debt restructuring agreement with China has come as a surprise to other countries, including Japan, India, and France, who were also in talks with Sri Lanka. These nations were on the verge of reaching an agreement and had requested debt treatment comparability with China.
Details Awaited for Finalizing Proposal
While creditors were struggling to reach a consensus, news of the debt deal with China has further complicated matters. Members of the creditor committee are now awaiting details of the agreement with China before finalizing their proposal. The ongoing negotiations between Sri Lanka and its creditors have been running parallel to the country’s $2.9 billion IMF bailout initiated last September.
Positive Milestone for Sri Lanka’s Economic Recovery
The agreement with China’s Export-Import Bank is considered a significant milestone in Sri Lanka’s ongoing efforts to foster its economic recovery. In the coming weeks, Sri Lanka and China EXIM will actively work on formalizing and implementing the agreed parameters of the debt treatment.
Overall, this debt deal with China offers a glimmer of hope for Sri Lanka’s economic future. As the country continues to navigate its financial challenges, the agreement provides a much-needed boost to its recovery efforts.
